On an Involuntary Conversion in Which the Taxpayer Does Not

question 48

Multiple Choice

On an involuntary conversion in which the taxpayer does not buy replacement property within the replacement period,the gain on the involuntary conversion and any tax due must be reported:

• A)In the year the replacement period expires.
• B)In the year the involuntary conversion occurred.
• C)Never,because the tax year of the conversion would be closed.
• D)As soon as the taxpayer knows replacement property will not be purchased.

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Definitions:

Price-level Accounting

An accounting method that adjusts financial statements to reflect changes in the purchasing power of money due to inflation or deflation.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term liquidity of the company.

Long-term Investments

Investments made with the intention of holding them for an extended period, typically more than one year, such as bonds, stocks, or real estate.

Accounts Receivable

Funds that a company is yet to receive from its customers for products supplied or services rendered but haven't been paid for.